Almost All States Sign On To Massive Mortgage Settlement

Last night was the deadline for the attorneys general of each state to sign onto a massive settlement with the nation’s five largest mortgage lenders, and more than 40 of the states opted to join in the pot-sharing.

The settlement would reduce mortgages by about $20,000 for upward of 1 million homeowners and as many as 750,000 people who were foreclosed upon could see $2,000 settlement checks.

Among the few holdouts are two of the country’s largest and most populous states, California and New York, as well as Nevada and Arizona, two of the states hit the hardest by the collapse of the housing market.

While those behind the settlement are hoping that all the states will ultimately sign on — bringing the value of the settlement up to around the $25 billion mark — California AG Kamala Harris says there are “significant sticking points” currently keeping the state from signing onto the deal.

If a state decides to opt out of the settlement, its residents will not share in the benefits. The individual states could still continue to seek settlements on their own with the five lenders — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.

The settlement would apply only to privately held mortgages issued from 2008 through 2011.

We all pay for it via increased costs for future mortgages. Any loss a mortage lender suffers is ultimately passed on to the consumer, and in this case that means higher fees and interest rates to offset the additional risk.

Plus, many of these banks also deal with other financial products like checking accounts, credit cards, auto loans etc, so there may be some cost shifting between divisions.

Finally, if you happen to own shares in any of these companies (which includes those who are invested in mutual funds and index funds), you will suffer a loss as the stock price takes a hit due to this rather large expense on the balance sheet.

Either way we all pay for this – even those of us who engaged in responsible borrowing in order to finance our homes.

Only the “Big 5″ mortgage lenders are being punished. Nobody is forcing you to get a mortgage or use financial services with any of them. If this lawsuit makes their rates or service even less competitive then all the better.

If you own shares in these companies then why shouldn’t you take a hit for their bad business practices? Again, nobody forced you to invest in these companies (and yes, this includes taking responsibility for where your mutual funds are invested).

Right, but at that time, the terms of your loan are already set. These big 5 can’t just alter your loan (unless you’ve agreed to it, i.e., ARM) to pass on the higher cost to the consumer. They are still obligated to uphold the terms of your loan that were set by originating bank.

Not really… because if I’m not a customer or shareholder of a company involved in a class action case, I’m not impacted. In this case anyone who is a customer or shareholder of one of these five mortgage lenders is paying for it or may pay for it in the future.

“Only the “Big 5″ mortgage lenders are being punished. Nobody is forcing you to get a mortgage or use financial services with any of them. If this lawsuit makes their rates or service even less competitive then all the better.”

I understand that this only impacts the top five, but considering what percentage of loan volume those top five do, it can be difficult to get away from them. Keep in mind many mortgage companies just originate loans which end up at these big five anyway, so even if a customer doesn’t realize it they may still be indirectly doing business with one of them.

If you own shares in these companies then why shouldn’t you take a hit for their bad business practices? Again, nobody forced you to invest in these companies (and yes, this includes taking responsibility for where your mutual funds are invested).

I’m not saying shareholders shouldn’t take a hit, but justified or not they are… which again comes back to how we as customers / shareholders are taking a hit on this.

I understand your point, but I’m not convinced this settlement is even warranted. Note it only impacts loans for a few select years after the bubble burst, and the reality here is nobody has shown widespread abuses. The banks know that a large settlement will cost them less than defending thousands of individual cases, so they are quick to take the least harmful option, but I for one am not sold on the idea of a blanket rememdy just because these five happen to be the biggest.

Am I seriously supposed to assume the next five largest banks are 100% innocent? Am I supposed to believe not a single homeowner submitted falsified paperwork which resulted in a mortgage they could’t afford? Am I supposed to ignore people who refinanced their mortages to take money out which was used to buy a new car, pay for a vacation, or buy that new 55″ 3D LED TV the just had to have before they lost a job and realized they couldn’t afford their payments?

Sorry – I just get a little tired of the “big banks are evil” mentality which places 100% of the blame on them just because they are the biggest and easiest targets. I don’t see anything in thsi settlement that punishes people who strategically defaulted on their mortgages, I don’t see anything in the proposal that offsets the “compensation” for the 16-22 months on average people lived in their homes without making payments, and I don’t see anything that punishes borrowers for knowingly submitting false paperwork or fabricated pay stubs.

I guess the banks are just 100% to blame as usual right? This is why I get so frustrated – because there is no such thing as personal responsiblity and everyone is always looking to blame someone else… which typically means whoever has more than they do.

That’s just bad thinking. If a company, like a bank messes up official paperwork and damages people – the borrowers, then the company should pay the civil cost of that misbehavior. That should come out of the profits and out of the stockholders dividends, the same as if the company messed up and made bad decisions and lost money.

If you pay more for that, then do your business with a different bank that didn’t mess up.

I think the point is we as consumers are paying for something that could be argued wasn’t even “wrong”. The loans this settlement covers are from 2008 to 2011, and there is no evidence of widespread abuses during that time period. It doesn’t matter what these banks do, people will still think they are the problem because they are the big, bad banks preying up on the small innocent homeowners.

Where is the part of the settlement that mentions proportional guilt? What about those homeowners who knowingly falsified documents? What about the homeowners who discovered (through no fault of the banks) that their home value dropped 20 – 30% so they just walked away via strategic default … where is the part of the settlement that excludes them from receiving compensation?

It doesn’t exist, and the reason is because everyone knows it is less expensive and less time consuming to just throw a pile of money at something to make it go away. You won’t convince me that the banks are entirely to blame here, and you surely won’t convince me that all five of them just happened to do the exact same things and follow the exact same processes and as such are all equally guilty while the next 95 largest banks are 100% innocent.

This is a classic case of throwing darts at the big targets while ignoring everything else. So no – I don’t think it is far to either the homeowners who were responsible in paying for their mortgages, those who only took out enough to buy a home, those who put down large down payments, those who didn’t take cash out for other purposes, those who had sizable savings in case of emergency, or even the banks who most likely did everything right in 99 out of 100 loans but are now the target of Attorneys General merely because they happen to be responsible for a large percentage of the mortgage market.

My house is underwater. I can afford it and I have no intention of defaulting on any loans. However, that doesn’t mean that I’m happy that the value dropped below what I owe (mostly due to external situations that I have no control over, such as a high number of foreclosures in my development in the past two/three years).

I suspect I’ve lost all the original 20% equity I had in my house as well. I read elsewhere that if that fact was preventing one from refinancing, there will be some aid to help allow a refinance to happen going forward.

I haven’t been that interested in refinancing, as I’d rather receive a principle reduction, although I don’t see that happening. However, if I refinance and apply the difference between the old and new mortgage payments to an exit strategy of sorts, perhaps that’s better than nothing.

My thing is this: If my neighbor is facing foreclosure, and I’m still making ends meet just fine, I can see the benefit to me in his getting aid from our tax dollars if it keeps him in his house. However, since we are talking about tax dollars here, at some point I’d like to be invited to the table as well, because I’ve lost a lot of money. I don’t have to be first, but I want to get my cut at some point. But I have a feeling that will never happen.

Actually, the latest version of the deal I saw did have a plan to give money to some homeowners who are current on their loans, to stave off some of this protest.

Of course the whole thing is a giant bailout for the banks. Note that banks will be allowed to spend investors’ money (i.e. pension funds and state & local governments, the people who own the mortgage-backed securities that the banks are servicing) in order to satisfy their obligations under the settlement. So the bank gets a release for its literally fraudulent behavior, and pays for it with a union pension fund’s money. Win!

…well, it is for Obama, since now he’ll get the banks’ campaign donations…

This deal isn’t to solely protect the banks from you the consumer, it’s to protect the banks and brokerage houses from the people they defrauded selling the mortgage backed securities, even though they knew they were full of fraudulent loans, handpicked to fail, and sold as top quality meat while those banks and investment houses were betting on the securities to fail.

Yup! And those of us who didn’t buy a house because we saw the prices skyrocketing unreasonably also get to pay. I’m, frankly, pissed. These mortgate lenders violated ethics and laws, and yet again, they’ll get away scott free.

Do they still want me to pay a quarter million dollars for a tract house with no yard, poorly performing schools, and a 1.5 hour drive from the downtown area? Sorry, the real estate business is a scam.

Stupid homeowners getting a bail out again. Using their home as an ATM to buy rims for their Escalades. Should have to suffer. Everyone’s to blame. Issuers, Appraisers, Insurers, and most of all those responsible for purchasing.
Those of us intelligent enough to understand homes were way over valued, and there was hysteria, get to sit on the sidelines and continue to wait for the other shoe to drop, which it will, as it has been predicted. Home are still too high for current wages.

I was working bought a small house. Lost job. AND YOU USE RACIST CRAP ABOUT RIMS.
Screw you. I can’t sell my house to get out of this problem. Paid $80K for a house now worth $20K. I’d do the right thing if BOA would do the right thing. I kept trying to catch my mortgage up and they refused payments.
BOA is suing me and they have no claim to my house. They sold the mortgage off to Fannie Mae. However, their shyster told the court BOA owns the mortgage. Guess next time in court he’s getting in trouble for perjury.

…and nobody admits fault or goes to prison. How convenient. Also, they helped contribute to the the down economy and the stretched state budgets. Now, they can take advantage of states’ desperation by offering a small portion of their total responsibility.

Ok, so …as a responsible person, I’ll get nothing. Fair enough. BUT…25 billion is a lot of money. The banks will have to raise rates or fees probably. Oh, so I DO get to participate after all! Participate in paying for that 25 B.

I’m sick and tired of this crap where we treat these people who took these loans as “victims”. They are not victims at all, they deserve to lose their homes and go rent somewhere that they can afford. It’s a load of bullshit, if someone can’t read and comprehend the amortization schedule for their home and understand that it costs money to live in a 500,000 home then FORECLOSURE. This reminds me of all the people whining about credit card debt, heres a clue, don’t charge it if you can’t afford it. (I’m not referencing people who are in CC debt due to legitimate emergencies, but idiots who charge consumer goods they can’t afford).

I’m sorry, do you even have a clue what this is about? Do you hear foreclosure and just repeat the latest crap from Fox News?

This is about how a lot of banks faked a lot of foreclosure papers, hurting the borrower and in not so few cases people who had no reason to be foreclosed on.

Yes, they were hurt, in many cases the foreclosure could have been averted, but the banks pulled all sorts of stupid paperwork stunts – do you really think they shouldn’t have to pay for doing such illegal things? Are banks always right no matter how wrong?

Under the deal, the mortgage principal for about 1 million homeowners would be written down by an average of $20,000. An additional 750,000 Americans ‚Äî about half the households eligible for aid under the deal ‚Äî would receive about $2,000.

“This will have a role in providing certainty to the (financial) markets about credit being eased and homeowners getting some money back,” Stevens said.

Still, several housing and community organizations have complained that the settlement wouldn’t go far enough.

George Goehl of the National People’s Action, a collection of community housing groups, said $25 billion for homeowners would be a “paltry down payment,” considering that roughly 11 million homes are underwater by a combined $750 billion.

I don’t disagree with you about the robo-signing foreclosures that were in error and rampant. The article itself lends itself to the notion that the settlement is to help people who are underwater on their mortgages. The robo-signing is mentioned, but is OBVIOUSLY not the main driving force according to the article and the settlement as it is geared towards reducing existing principal on notes and not punishing the banks punitively for predatory foreclosure practices.

People borrowing too much from the bank to buy a house someone cannot afford is what I am bitching about, NOT banks foreclosing erroneously through robo-signing.

There needs to be a settlement to punish the banks for robo-signing and compensate people who were victims of fraudulent foreclosures, not a settlement to reduce peoples principle because they are underwater. The settlement as exampled in the article does NOTHING to punish faulty foreclosures or compensate displaced individuals who were the victims of that practice.

And as an aside, I cannot stand the banks at all. They are horrible entities geared completely in the wrong direction. A bank foreclosing on someone who isn’t paying them isn’t in the wrong even though I despise them. A bank foreclosing with shitty paperwork in error IS WRONG.

Again, two entirely separate issues.

Some homeowners who bought too much house and stopped making payments or were missing payments may have been foreclosed upon using robo-signing practices as mentioned and while the bank may have been wrong in those cases. Who is right? The consumer who isn’t paying his bills or the bank taking short cuts to foreclose? You can’t answer that one. I say punish the banks, but for God’s sake don’t reward people who are underwater merely for being underwater it’s like welfare.

So, this settlement only applies to mortgage loans made after the housing crash in 2008 even though most of the real abuses took place before 2008.

And, the settlement is only provided to those people behind on their payments, even though abuses were systematic and also affected those that aren’t behind on their payments. How is that even remotely fair? That’s putting the onus on the homeowner, who was abused, rather than the bank, who did the abusing.

I seriously hope there’s some judge out there that can reject this settlement.

So for people like me who are stuck with one of these big five, but who bough before 2008 and who are able to make their payments, even though the value of my house is lower than what I paid, what do we get exactly – nothing. Being responsible and getting a house we could afford to keep payments going on was apparently not as responsible as we thought. Sure we can make the payments but the house value has dropped (like many due to forclosures in my area) and it just pissed me off. We didn’t overpay for our house, but the combination of forclosures, the crappy market in general, and people who sold cheap (we had homes that people just wanted to get rid of – paid off and inherited from a deceased relative in our area – a couple it turns out) just to get rid of the house so that brought our house value down. This is just ridiculous.

For the underwater homes, there is a lot of blame to pass around, but a lot of it does rest with our idiot neighbors who apparently bought homes they couldn’t afford. The homes in my square are all about 5 years old and we just had another foreclosure (different model house at least) and then the people two doors down from us (same model) just suddenly packed up and left. No “For Sale” sign out front yet, so I’m waiting to see the foreclosure notice posted in their window. The house next to them just finally was purchased after a foreclosure about 4 months ago. I’m still afraid to see what the transaction price was.

The DC area market is actually better than most places, but if there are constantly homes on your block available at fire sale foreclosure prices, you’ll never start climbing back up. If we ever want to move for whatever reason, it looks like I’ll be becoming a landlord unless we want to lose a bunch of money.

$20,000! I WISH the value of my place had only gone down that much. Let’s see, I paid $123,000 and now similar condos with the same floor plan are sitting on the market for months at $35,000. I don’t think a piddly twenty grand is going to make it worth keeping a place I’m over paying for and don’t really like all that much. And before you high horse homeowners get all up in arms, I thought I was buying at the bottom of the market and bought well within my means (at the time) with a fixed 30 year mortgage. I never took any equity out of the place and I had nothing to do with the fact that I got laid off. Tell me again why I should lose more than the $60,000 I’ve already sunk into this place and the bank should keep making a profit off of the interest I pay? Forget it!

It is the bank’s fault that you agreed to the terms of a mortgage written in black and white in which you obviously have no problem paying?

It is the bank’s fault that they are making a bit of profit from the interest you agreed to pay?

Seems like sour grapes to me. You gambled that the housing market would continue to rise and that gamble ended up not working… so now you want to take your money back. You think that makes sense?

Of course if you house had increased in value to $200,000 and then you sold it I’m sure you would have thanked the bank right? I’m sure you would have driven over to their offices and offered to write them a check for half of the excess amount because they were responsible for the loan in the first place correct?

Yea I didn’t think so. You made a poor investment decision – get over it.